Weekly Market Review
U.S. Trade Representative, Robert Lighthizer admits that China is not currently at the pace needed hit their commitment in the phase one trade deal. However, he is confident China will comply with the deal and even hinted at purchases of ethanol and more soybeans on the way. Even though last month President Trump made comments about how unhappy he was with China. This is mostly due to their handling of the coronavirus and the Hong Kong riots. He even threatened to “cut off the whole relationship.” China continues to buy and booked a massive 38 million bushels of new crop soybeans in a week.
Cargill’s chief executive in Brazil is worried that insults made by the Brazilian government about China may severely hurt South American business interests. The Brazilian President’s son, who is a lawmaker, accused China of spreading the coronavirus to multiple countries. Also the Education Minister suggested in April that the disease would help China “dominate the world” in a tweet. Brazilian soybean exports have remained strong even through the turmoil.
Brazilian soybean demand continue to put pressure on the United States. However, we may soon see a shift in the market. Brazil has already shipped out a massive 6.3 million metric tons of soybean in June. There exports will dry up after July and the export program will turn to corn. Which would be good for U.S. soybeans but may have a negative effect on U.S. corn.
The weekly ethanol report showed the 7thconsecutive increase in ethanol production at 841,000 barrels per day. Ethanol reserves decreased for the 8thweek in a row to 21.34 million, 200 million less than trade was expecting and 1.6% less than a year ago. Margins are estimated to have improved 4 cents per gallon this week to 5 cents. There are some discussions in the economy that a second wave of COVID-19 may hit and hurt travel this summer.
Informa released there updated acreage estimate. Corn came in at 94.1 million acres, slightly below their previous estimate and down 2.9 million acres from the USDA estimate. Beans came in at 85.5 million acres, slightly below their previous estimate but still 2 million acres above the USDA estimate.
A surprising weekly crop conditions report garnered some attention this week. Corn good to excellent rating came in 4 points lower than last week at 71%. Nebraska saw the largest drop in rating for the Corn Belt, down 12%. However, Iowa, Illinois and Indiana are each off 2% this week. Soybean ratings went unchanged.
The corn ratings took a tumble due to heat over the western Corn Belt in the first half of this month. The temperatures were high enough to bring the Corn Belt average to one of the hottest in the past 4 decades. The east has seen mild condition in this same time span. However, rains look to move through the Midwest this weekend. Something trade will keep an eye on.
The Coronavirus Food Assistance Program, otherwise known as CFAP, has processed $2.89 billion in payments to 220,280 producers. Iowa saw the largest number of non-specialty crop applications at over 20,000 with $143 million in payments.
For more information, you may contact Alex Londerville at (515)-341-7040, or e-mail at firstname.lastname@example.org. The opinions and views expressed in this commentary are solely those of Alex Londerville. Data used in writing this commentary obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position. Please visit our Risk Disclosure Page for more information on commodity trading.
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